Investing with Conviction in the Face of Uncertainty

Excerpted from our 2022 Semi-Annual Shareholder Letter. Market volatility spikes two kinds of fear: Fear of missing out and fear of loss.

If someone asked me in January of 2022 to predict some of the key news and market headlines over the next twelve months, I would have been way off.

Russia invaded Ukraine. Confidence in cryptocurrencies crumbled from scandals and selloffs. The energy sector was the top-performing sector in the S&P 500. Amon g other extreme weather events, monsoons left a third of Pakistan under water. In June, inflation hit its highest rate since the early 1980s. China re-opened its borders after three years of a zero-tolerance Covid policy. And in U.S. politics, the “red wave” that many people thought would happen in the midterms was little more than a red ripple.

Alongside these events, there were macroeconomic factors putting pressure on markets–the result of government spending (fiscal policy), interest rates (monetary policy), and our position in the market cycle.

Fear encourages poor investor behavior

These headlines can spike fear for you as an investor.

Fear of missing out on opportunities that could make you rich and fear of losing money if you don’t react quickly enough.

It is well known that fear encourages poor investor behavior. History shows that investor responses, though attempting to capitalize on market opportunities, often result in actual returns being lower than the broader market’s returns, meaning they would have been better off riding the ups and downs of the market without making tactical moves.

So what do you do in times of market volatility?

Develop timeless convictions to counter fear.

“We remain committed to our strongest investment conviction, our investment philosophy, a philosophy that is rooted in our understanding of who people are, how they operate, and how they flourish.” Timeless convictions counter fear

It is a part of our regular rhythm at Eventide to repeat our timeless convictions out loud to each other. Some of them are even fixed on our walls and our coffee cups. Our convictions anchor us as we navigate the ups and downs of the market with courage rather than fear.

We remain committed to our strongest investment conviction, our investment philosophy, a philosophy that is rooted in our understanding of who people are, how they operate, and how they flourish. It states, “We believe high-quality companies that excel at creating value for others and trade at a discount to intrinsic value offer superior long-term risk-adjusted returns.” It is within this conviction that we can make decisions to navigate volatile market conditions. Conclusion

To you, our shareholders, we are grateful for your trust. If someone were to ask me to predict some of the headline events that will take place in 2023, I would be just as off as I would have been last year. Thankfully, our investment approach isn’t dependent on our ability to predict the unpredictable—We don’t let fear of missing out or fear of loss guide our approach.

On your behalf and in your interest, our aim is to make strategically anchored, long-term decisions based on firmly held convictions. We believe this leads to portfolios that are better for our investors and better for the world.

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Disclosure: This communication is provided for informational purposes only and expresses views of Eventide Asset Management, LLC (“Eventide”), an investment adviser. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Eventide’s values-based approach to investing may not produce desired results and could result in underperformance compared with other investments. Any reference to Eventide’s Business 360® approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform Eventide’s overall research process. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results.